GVEA Capital Budget for 2015

The board is meeting today in executive session to discuss and then (coming out of executive session) to approve the 2015 Capital Budget.     The proposed budget is documented on GVEA's site in the member book packet but is roughly $107 million, including $80 million for Healy Unit 2 restart.

GVEA projects $21 million principal payment on debt and additional loans and other financing of $94 million.

Big chunk of change.   You can read the details starting on page 18 of the member book located here.

Rate history

I was just looking at my electric bill history and thought it might be interesting to see how rates have changed from past years.  I went back to 2010 and below are the rates.

There are two major components to consumption:  Utility charge and energy charge.  

The utility charge is everything not related to the cost of energy, such as operations, administration, legal, interest, depreciation and payment on loans, distribution and transmission costs.

Energy charge is everything that is related to the cost of energy.  It was formerly known as COPA - the cost of power adjustment and meant to allow a utility to change their rates based upon the fluctuating cost of energy (oil, gas, coal, etc.)  What is allowed to be included is set by the Regulatory Commission of Alaska.  For example, some years ago GVEA asked that the cost of ash disposal from the Healy coal fired power plant be allowed to be included in the COPA (the RCA said yes).    More recently, GVEA had asked to include the cost of building Eva Creek wind farm in COPA, as there is no energy charge from wind.   GVEA withdrew that request after realizing that the RCA wouldn't rule on it in time for it to be of financial advantage to GVEA.

Both rates are initially set after a rate study, which GVEA only does when there is a major shift in the numbers, such as inclusion of a new power plant.   Such studies cost over a million dollars so not to be done lightly.  

The utility charge is allowed to be changed in the interim every 6 months through a SRF (simplified rate filing) to the RCA, but not more than 8% in a year.    The energy charge can be changed quarterly and is subject to this complex formula.

In addition to these two charges, there is a fixed customer charge for the  cost of having a meter, regardless of whether you use electricity or not and then a very minor regulatory charge to compensate the RCA for overseeing the public interest of utilities,

If you are a large commercial or industrial customer, you will have a lower utility rate, but then also have a demand charge, based upon your peak consumption for the past 12 months.   GVEA talks about all these charges on their website.   They do have a handy bill calculator as well.  It would be interesting to have a table like below that would go back further.

So here is the last 4 years of rates by month.

Month	Utility	Energy	Subtotal
Dec-14	$  0.10341	$  0.09947	$0.20288
Nov-14	$  0.10341	$  0.10378	$0.20719
Oct-14	$  0.10341	$  0.10378	$0.20719
Sep-14	$  0.10341	$  0.10378	$0.20719
Aug-14	$  0.10341	$  0.10593	$0.20934
Jul-14	$  0.10341	$  0.10593	$0.20934
Jun-14	$  0.10341	$  0.10593	$0.20934
May-14	$  0.10001	$  0.09496	$0.19497
Apr-14	$  0.10001	$  0.09496	$0.19497
Mar-14	$  0.10001	$  0.09496	$0.19497
Feb-14	$  0.10001	$  0.09631	$0.19632
Jan-14	$  0.10001	$  0.09631	$0.19632
Dec-13	$  0.09724	$  0.09631	$0.19355
Nov-13	$  0.09724	$  0.10576	$0.20300
Oct-13	$  0.09724	$  0.10576	$0.20300
Sep-13	$  0.09724	$  0.10576	$0.20300
Aug-13	$  0.09724	$  0.08774	$0.18498
Jul-13	$  0.09724	$  0.08774	$0.18498
Jun-13	$  0.09724	$  0.08774	$0.18498
May-13	$  0.09597	$  0.11078	$0.20675
Apr-13	$  0.09597	$  0.11078	$0.20675
Mar-13	$  0.09597	$  0.11078	$0.20675
Feb-13	$  0.09597	$  0.10802	$0.20399
Jan-13	$  0.09597	$  0.10802	$0.20399
Dec-12	$  0.09004	$  0.10802	$0.19806
Nov-12	$  0.09004	$  0.13768	$0.22772
Oct-12	$  0.09004	$  0.13768	$0.22772
Sep-12	$  0.09004	$  0.13768	$0.22772
Aug-12	$  0.09004	$  0.12379	$0.21383
Jul-12	$  0.09004	$  0.12379	$0.21383
Jun-12	$  0.09004	$  0.12379	$0.21383
May-12	$  0.09004	$  0.12527	$0.21531
Apr-12	$  0.09004	$  0.12527	$0.21531
Mar-12	$  0.09004	$  0.12527	$0.21531
Feb-12	$  0.09004	$  0.12737	$0.21741
Jan-12	$  0.09004	$  0.12737	$0.21741
Dec-11	$  0.08791	$  0.12737	$0.21528
Nov-11	$  0.08791	$  0.10924	$0.19715
Oct-11	$  0.08791	$  0.10924	$0.19715
Sep-11	$  0.08791	$  0.10924	$0.19715
Aug-11	$  0.08791	$  0.10943	$0.19734
Jul-11	$  0.08791	$  0.10943	$0.19734
Jun-11	$  0.08791	$  0.10943	$0.19734
May-11	$  0.08337	$  0.10051	$0.18388
Apr-11	$  0.08337	$  0.10051	$0.18388
Mar-11	$  0.08337	$  0.10051	$0.18388
Feb-11	$  0.08337	$  0.08929	$0.17266
Jan-11	$  0.08337	$  0.08929	$0.17266
Dec-10	$  0.08337	$  0.08929	$0.17266
Nov-10	$  0.08337	$  0.09137	$0.17474
Oct-10	$  0.08337	$  0.09137	$0.17474
Sep-10	$  0.08337	$  0.09137	$0.17474
Aug-10	$  0.08337	$  0.09401	$0.17738
Jul-10	$  0.08337	$  0.09401	$0.17738
Jun-10	$  0.08337	$  0.09401	$0.17738
May-10	$  0.08337	$  0.09890	$0.18227
Apr-10	$  0.08337	$  0.09890	$0.18227
Mar-10	$  0.08337	$  0.09890	$0.18227
Feb-10	$  0.08337	$  0.09886	$0.18223

In the meantime ... transmission improvements

With all the moderate knashing of teeth regarding the proposed regulation of carbon dioxide by the EPA (WAY past time, in my view) and giving the responsibility for reduction to the states to work out, this recent article in the Alaska Journal of Commerce caught my eye.   Maybe what the State of Alaska will kick in more money for upgrading tie lines and then require GVEA to mothball a coal fired power plant?   Or maybe, not mentioned in the article, Aurora Energy would convert to natural gas?  That would go a long way toward cleaning up downtown and still serve the core areas with district heat, but would certainly change the dynamic especially as far as steam goes.

Readers may recall reading about the various $900 million in recommended transmission improvements in a report from the Alaska Energy Authority.  It didn't include proposed trucked natural gas in its projections, but is still draft.

And with all the spare capacity in the railbelt, there doesn't appear to be any crying need for Susitna.

So many moving parts.

Notification system progress

I had a meeting with Mike Wright and Lynn Thompson at GVEA today to discuss (at long last) price signaling and member notification. Mike laid out a case where GVEA's fuel balance, especially once Healy 2 comes on line, doesn't really demonstrate a need to balance peaks most of the time. Demand varies from roughly 120 mw in the summer to 210 mw in the winter.

Our supply is: Baseload resources

Healy 1 - coal - 25mw capacity - .065/kwh

Healy 2 - coal - 50 mw capacity - price TBD once operational in 2015 or 2016 but likely about .105

Aurora - coal - 23 mw on a 25 year remaining take-or-pay contract, ending 2031 - about $.06/kwh

Load following (i.e. flexible on/off and capacity adjusting)

South Central economy natural gas - up to 78 mw - $.095-$.115 - across the Northern Intertie

North Pole expansion plant (LM6000) - oil (new contract with Petro Star), 65 mw capacity - $.26 kwh, but only .16 kwh in co-generation mode

North Pole 1 and 2 - oil - Qty 2 60 mw - $.25/mwh - no cogeneration and older so more expensive

Zender 1 and 2 - oil - Qty 2 x 18 mw - $.30/mwh

John Brown formerly Chena 6 - $.60/mwh - located in Delta, only used in emergencies

Renewable sources

Bradley Lake, hydro, 24 mw capacity, $.05/kwh - cycled base upon need

Eva Creek - wind - 24 mw capacity, $.00 (no cost)/kwh, sometimes can't use as other baseload resources already covering.

The look above, once we have Healy 2 on line, is that except in the deep winter, we won't be taking much natural gas from Anchorage as it runs about the same price as Healy 2 is expected to.
All this being said, there are other reasons to have a notification system.

One of the challenges and opportunities is that GVEA's contact info on members is way out of date, especially as far as cell phones and email. This would be an opportunity to get updated. Perhaps this could be a MAC job?

GVEA might consider an inexpensive notification system such as FNSB Air Quality Dept is now rolling out (3rd party alertmedia.com , a Nixle like service) with an in-house Google form to sign up. Notifications could be for a variety of reasons: outages, price signaling, board and annual membership meetings, RCA hearings, etc.

I was told that GVEA is anticipating spending $300,000 in a future budget to upgrade their outage notification system with lots of bells and whistles. Maybe this is way too much? As it is now, it appears that Facebook offers more information about outages in progress than any other form of communication.

So we will see where this goes.

Ballot counting #4 - incumbents retain their seats

It appears that the incumbents retained their seats. Still pending all the final numbers, but what I have are the winners with at least 40% of the vote. District 1 - Aren Gunderson - 471 votes District 2 - Tom DeLong - 506 votes District 3 - Rick Schikora - 363 votes (this was a 3 way race) An update on ballots that weren't countable due to deficiencies - it was 363. That's a lot, but typical, I'm told. While there are clear instructions on the process, I think that there should be a revisit of the multi-step process as it seems disrespectful to discount so many ballots where people at least made the effort to vote. Here are the more complete results.

Ballot counting #3

All acceptable ballots have been counted and are entered into the scanner. There are over 200 ballots that weren't on the other count due to deficiencies such as no signature on the outside or wrong signature. 10 were accepted that were delivered to GVEA offices instead of the official address. One rejection was a person whose wife had signed as the person had died some months ago. It is being held in abeyance as the signature didn't indicate she was a personal representative of her deceased husband. The computer will then be spitting out results shortly.

Ballot counting #2

An hour plus has past now and ballots are still be counted. 874 have been counted, roughly one third. The way it works is the ballots are removed from the envelope by the MAC in blocks of 50. They are then counted to make sure there are 50, then collected as a block and given to the person who then scans them into a portable counting machine. Because each district ballot is differennt, the machine knows the difference between districts. Unlike some previous years before the election process was outsourced, there won't be any real interim results, just a final one. Note that board members John Sloan and Chris Bunch are official observers, with candidate Tom DeLong stopping by, listening to MAC member Heidi Titchenal.

GVEA Board of Directors counting of ballots

GVEA is counting ballots received for the board of directors for districts 1, 2, and 3 this afternoon and evening in the board room of GVEA off Illinois St. All GVEA members are welcome to observe. Members of the MAC board will be doing the counting. You can read about the folks running on the GVEA website. Here are some opening numbers: District 1 Ballots mailed out: 6027 Ballots received: 882 Percent voting: 14.6% District 2 Ballots mailed out: 6249 Ballots received: 871 Percent voting: 13.9% District 3 Ballots mailed out: 6849 Ballots received: 811 Percent voting: 11.8%

Proposed EPA rules to limit carbon dioxide emissions

For decades, there has been attempts to limit carbon dioxide emissions at local, state, national and international levels. Since the intent is to reduce climate disruption that known no borders, getting agreement to take action has been challenging, to the say the least. The argument from those opposed to such reductions is that it will cost the economy by raising the price of energy. This might be true if one ignores the external costs of using fossil fuels (the primary source of CO2 in this case) and the cost of adapting to the wide range of effects to our world from climate disruption. Carbon credits have been used in Europe and elsewhere, while a carbon tax has been resisted successfully. The idea that we need to reduced our CO2 emissions isn't new and any responsible group or individual that is in the policy side of power plant production should be aware of this. Earlier this week, the U.S. Environmental Protection Agency issued a set of regulations that is up for comment. The regulations are intended to bring down the level of CO2 emissions from power plants overall and to do so on a statewide, not on just a per-power-plant basis. The proposed rules have already generated a lot of politicizing, which is unfortunate though predictable. I mean, does one really think that the intent of the EPA and Obama Administration is to 'destroy the economy'? The cost of mitigating CO2 is not well known because the concept of sequestering it is still pretty experimental. The cheapest way to reduce CO2 emissions is to not generate them. This is why the EPA proposed guidelines has a goal of reducing the carbon pollution emitted for each megawatt-hour of electricity generated and not necessarily eliminate coal fired power plants that can't reduce the CO2 output. GVEA is one of the few power companies in Alaska using coal for generation. With a 25 mw older coal plant in operation, GVEA recently committed nearly $200 mm to purchase, refurbish and install selective catalytic reduction (of nitrous oxide) equipment for Healy 2, a 1990's era experimental power plant. The loans GVEA is using are for 30 years, meaning that we owner-members will be paying debt in excess of the face value of the loan for that long. Coal plants typically cost twice as much as a natural gas fired power plant to construct, while the coal as a source of fuel is currently cheaper. This is what drives GVEA to use coal, because they can defer paying the piper and hope that they can not have to address cost of mitigating CO2. I have argued that is a false hope and believe it is irresponsible. GVEA seems to love new projects and in the 5 years since we members allowed the board to not be restricted in borrowing, GVEA has roughly doubled the amount they have committed to borrowing than the previous limit of $450 million book value. I find that scary for members who will be paying off these loans for decades in their utility charge. The utility charge is roughly half of your bill with energy charge from the cost of producing the energy the other half. However, with the demonstrated need to reduce our CO2 emissions worldwide, for the life of me, I don't see the need to take on more long term debt that we can't get out of. There is a surplus of natural gas fired electricity in Southcentral now. Matanuska Electric has overbuilt generation, Munipal Light and Power (Anchorage) has surplus, Homer now has their own generation. Chugach, which formerly sold power to these utilities, now has surplus to sell as a result. GVEA had considered an option to build a natural gas fired power plant in Southcentral, but then would want more tie line capacity to Healy. These discussions were in executive session, so we don't know all the considerations. We are limited to 78 mw across the 138kv Intertie from Southcentral that terminates in Healy. We have roughly double that between Healy and Fairbanks. The Intertie can be upgraded relatively easily as the towers and insulators and some equipment is already designed for double that voltage. The point here is that a more efficient transmission network could allow us to take advantage of cleaner power throughout the Railbelt. The Alaska Energy Authority has a Railbelt Transmisson Plan that details where constraints and improvement might help us further the goal of cleaner and more efficient energy. Caveat: it's a detailed study and the costs aren't insignificant. Instead of a knee-jerk objection to the EPA, we might instead work toward our long term best interest of economic and cleanly generated electricity.

Board meeting upcoming Mon. May 12

Early this month, the next GVEA Board meeting will be held May 12, 2014. The member book has just been uploaded today and has some interesting items up for discussion and approval.

A proposed review of Healy 1 coal fired power plant operations and GVEA organizational structure and strategy for $130,000 plus travel and per diem for a consultant.

An investment policy for the funds put aside in a 'sinking fund' to pay back the balloon payment for the N.P. expansion plant construction bullet loan from some years ago. GVEA only pays interest at present, but is putting aside funds annually to be adequate to pay back the principal when due.

Finally, there was one late addition - a resolution to approve a fuel purchase agreement from Petro Star that was prompted by the upcoming closure of the Flint Hills Refinery. This was reported in the Fairbanks Daily News Miner May 9, 2014.

People around town have commented on the lack of quorum for the recent annual meeting. I don't see this on the agenda, but perhaps it will be discussed under board member comments.

Annual meeting lightly attended, thus no quorum

GVEA's annual meeting at the Carlson Center only had 395 members registered, less than the required quorum of 650, so it became an informational meeting with approval of 2013 minutes held over until the 2015 annual meeting. It was reported in the Fairbanks Daily News Miner

It seems to many that the elimination of the registration bonus $15 in 2013 was the most likely culprit. It was also an attempt to save money on the production of the meeting, costing about $18,000 last year. GVEA wisely announced this in advance to avoid unhappy people in the line and it would appear that their marketing effort was successful in a perverse way. Even with reduced number of cookies and no fruit-vegetable platters, there were trays full of cookies left over. Here's board Chairman Bill Nordmark at the leftover table following the meeting.

If reduced attendance is expected to continue, it might be considered to have it in a smaller and more affordable venue next year. The meeting used to be held at Hering Auditorium.

In a positive vein, the reduced attendance meant that the odds of winning the 9 drawings for $250, $500, and $1,000 were up. Two next-door-neighbors on Chena Hot Springs Road each won one.

The meeting was not video'd this year as in the past few years, but meeting audio and the Powerpoint presentation was promised to be on line soon.

A final thought is that it is important for members to be involved in their co-op, thus show up. Member feedback in the past couple years was to do away with the frills of the annual meeting production and concentrate on business. I think this goal was accomplished. That being said, it appears that carrots are still needed to garner a quorum.

GVEA commits to $143 million for Healy 2 restart and updates to Healy 1

With a 6-1 vote, the GVEA board approved a contract to Black and Veatch in the amount of $92.75 million to provide environmental controls to both of GVEA's coal fired power plants in Healy.   In addition, they also approved $50,372,131 for making Healy 2 functional.   It has been mothballed since 1997.

With investments of over $320 million prior to this, I believe this might be the most expensive coal fired power plant for the 50 mw it is intended to produce. Here is the resolution. It was a last minute addition to the agenda and not included on the downloadable member book from GVEA.

Alaska Energy Authority Railbelt Transmission Study March 2014

Available in draft form dated March 17, 2014, the Alaska Energy Authority has released the Pre/Post - Watana Transmission Study.   Whether or not Susitna gets funded, the pre- aspect of the report is helpful to understand the current status of the Railbelt utilities and what should be done to address the current status. It is quite detailed.   In some respects, this study is an update of the 2009-2010 study mentioned in my last blog.    It offers projects for $900 million with $2.7 billion in benefits.   This is of course much more debt than utilities can take on themselves, so substantive state funding would be requested, some of which included perhaps in the construction cost of Susitna-Watana if we get that far.

The summary of the report says:
 
The recommended transmission system improves reliability, mitigates future cost increases to Railbelt rate payers, allows unconstrained energy transfers and the use of peaking capacity from the Bradley Lake hydroelectric project, provides improved and increased energy transfers between all areas of the Railbelt, and facilitates the addition of the Watana large hydro project. 

 

The benefit of the projects as a whole results in a net present value savings of over $2,678,425,000 over the 50-year life of the projects in power production simulations when compared to projected 2015 operating conditions.The economic benefit of improved reliability as measured by unserved energy, capacity deferral of individual utilities, reservoir optimization of the Bradley and Cooper Lake hydro plants, the use of excess energy during high water years,construction savings during the required rebuild of existing facilities and the amount of capacity deferral saving further increase the benefit of the projects by an estimated $30-40,000,000 per year although these additional savings were not evaluated in detail.

 

The benefit of the improvements with increased energy from Bradley’s Battle Creek project or the ability to contract for increased base load gas supplies are not considered in the analysis. With a total construction cost of $903,200,000, this results in a simplified benefit/cost ratio of 3.4 utilizing only the production cost savings, which is an extremely high ratio for electrical transmission projects. The inclusion of additional benefits would push this number even higher. There are few projects that can be evaluated individually, since the benefits to the Railbelt consumers are derived from a combination of individual projects; however the projects can be evaluated by how they improve reliability and economics for the Anchorage–Kenai area, Southcentral Alaska and the Anchorage to Fairbanks (Northern) connection. These system improvements must be constructed and operational prior to commercial operation of the Watana Hydro Project or any other large energy project in

the Railbelt. Although all of these projects are also required to support a large energy project, improvements that are specifically required to support a large hydro project or any other large energy project are addressed in a follow-up study to this report.

GVEA Board discusses generation and transmission strategies

The GVEA board held a special meeting on April 23, 2014 to discuss generation and transmission issues and short, medium, and long term strategic goals.   Mike Wright, VP responsible for these, gave a presentation about GVEA's current situation and how it got there.  Some of the information was extracted from a 2009-2010 Regional Integrated Resource Plan  performed by contractor Black and Veatch for the Alaska Energy Authority.  

It was originally scheduled as an executive session except for member comments at the beginning.  However, when I showed up as a member to make a comment at the beginning, the board chair kindly opened the meeting for the educational session, closing it a few hours later when it came time for the board to discuss what to do moving into the future with a new Integrated Resource Plan for GVEA, proposed to be contracted to Black and Veatch.    The latter is scheduled to come up at the executive session for the regular board meeting on April 28, 2014.   The Integrated Resource Study typically precedes a Rate Study that will be required once Healy 2 in on line for a year or so.  That will be a subject of other blogs in the future.

High points were:

• Anticipated growth (flat*).
• Age and condition of current generation facilities.
• Age and condition of current transmission facilities, including substations
• Challenges in dispatch and balancing generation with demand, optimizing efficiencies with cost of various sources of power (I have great respect for dispatchers).
• Some discussion about what Ft. Knox and Pogo's commitments were and likely future.  In the mix: Flint Hills substantially reduced, Ft. Knox reduced, Pogo expanded, Clear AFB added.
• Other large customers and generation folks in the Fairbanks area:   Pump 9 in Delta, Ft. Wainwright, Eielson.
• Other generation and transmission in the Railbelt
• Homer Electric (HEA) now on its own generation instead of buying from Chugach.
• Matanuska Electric (MEA) now on its own generation instead of buying from Chugach, and with surplus power available for sale to other utilities.
• Anchorage Munipal Light and Power new generation.
• Opportunities and limitations for GVEA buying natural gas generated electricity from Chugach and in the future from MEA across the intertie.
• Challenges in the Kenai with transmission costs for getting electricity from Bradley Lake.

Looking forward, I would imagine the GVEA board, in executive session, discussed what generation they might look to retire.  For example, GVEA committed to either installing $35 million emissions reduction equipment (SCR) on Healy 1 by 2022 or shutting it down by 2024. 

Some of my observations:

• GVEA has the most diverse fuel-mix generation facilities of any utility in the Railbelt - coal, oil, natural gas from Southcentral, wind, and future trucked natural gas by 2015-16.
• We will have way more generation available to us than needed - out peak load in 2013 was 211 mw with about double that inf capacity. 
• We are still paying on quite a bit of this generation facilities - principal, interest and depreciation.
• GVEA still has more debt to be taken on with the restart of Healy 2 - over $190 million that has not impacted our utility charges yet.
• * growth is expected to be flat  (except if large projects come on line, such as Tower Hill Gold Mine in Livengood  for to 100 mw).   GVEA expanded their territory to include up to Livengood in 2013, but I hope that any generation needed is built on-site as, for this large load, it doesn't make sense to incur line loss.  Actually, I hope that Tower Hill builds their own generation.  Tom Irwin, former GVEA VP, is the local guy in charge of Tower Hill development so he should be aware of the impacts.
• There is a long term objective to see if utilities can pool their interconnecting transmission facilities to provide for a more efficient system for all.    A couple of attempts have already been made without bearing fruit.   See the Regional Integrated Resource Plan mentioned above.   Also, reference the tariff arguments now in progress before the RCA between HEA and other utilities with HEA now generating their own.

There are more details, of course.   One thing that always impressed me with this business is how many moving parts there are to provide electricity to consumers.  It's more than just electrons!

 

GVEA, Flint Hills closure, rate increases, debt

A recent Newsminer story detailing the impact of Flint Hills Refinery shutting down to GVEA, I've got a few mitigating solutions and some information to bring to light to our member-owners of GVEA.

GVEA wisely seeks to dispatch the cheapest energy first to meet demand.    Conservation is the cheapest source, electricity not used.   Natural gas from southcentral is the next cheapest, but is limited to about 80mw across the tieline.   GVEA's Healy 1 is the next cheapest, followed by the Co-gen plant at North Pole, then the two older oil fired generation then a few smaller units, including one in Delta.   They also have the Eva Creek Wind Farm and a smaller Delta privately owned wind farm from which they buy discount power.  Eva Creek, being free power, should be cheaper than coal, but harder to dispatch due to the variability.

I have been advocating a voluntary notification system to the board for over 2 years whereby, when they are about to need the costlier generation of oil, let folks know and see if short term reductions can be accomplished.    The CEO says the ball is in his court.   Lots of models out there, such as Nixle, the FNSB school notification, air quality alert system in progress, and a handful of utilities around the country.  No re-inventing needed for the wheel.  See my blog from last month.

We aren't in control of the Koch Brothers refinery decision.   They had a chance to participate in the trucked natural gas project, but backed out of it because they didn't want to work with anyone.

Related, GVEA's rate structure is such that, when the cost causer-cost payer principle that guides rate design is used, it has typically penalized those with the variable use (residential, small commercial) vs. the steady and interruptible rates paid by large industrial consumers.   When Healy 2 comes on, there will be another rate case and this should be part of the discussion.

Finally, while Healy 2 will be cheaper generation than North Pole on oil, we'll still have an increase in our utility charge to pay the loans and depreciation.   We are now beginning to see a bit of an increase from the $71 million invested in Eva Creek.  GVEA utility charge goes up 3.4% July 1.  Add to that almost $200 million from Healy 2 over the next few years.   That's a lot of debt, all told, almost double of what was allowable until we members allowed the board, in a bylaws vote, to exceed the $450 million book value of loans a few years ago.

So, will the Flint Hills Closure cost GVEA?  Yes.   Are there other ways of addressing the impacts?  Yes, again.  Is the there a larger picture to consider?  Most certainly yes?

GVEA Board met March 31.

The GVEA board of directors met on Monday, March 31.   There was predictably a couple hours of discussion to which members weren't invited, but topics were Healy 2, the closure of the Flint Hills Refinery, and the trucked natural gas project.  You can see the agenda on their website.   All board meetings now have info available.

We know a little more about the Flint Hills impact, as the Fairbanks Daily News Miner had an article last week about how and why energy costs were expected to increase.

My understanding is that the trucked natural gas project is likely to result in more expensive gas than hoped, around$17/mcf instead of the $10-$12/mcf previously bandied about.   If $12 is equivalent to $2/gal for fuel oil, then you can do the math.

As an aside, there will be an Interior Energy Open House Wedgewood hosted by state agencies AIDEA and AEA.  Also, the FNSB granted a $7.5 million revolving loan to the Interior Gas Utility Board (IGU) with lots of fiscal controls on expediture.   This $7.5 million was part of the settlement over valuation and back taxes that Alyeska Pipeline owed the FNSB, pending appeals.   And the governor is trying to stack the deck against the next assessment, but that's another story.

Other issues included:

Approval of a 3.4% increase in the utility rate, effective I believe June 1.  This was attributed to the debt interest on Eva Creek.   While this expected increase, it is also hoped that the energy charge would go down at least equal based upon the free wind energy.

Ft. Knox, asking what GVEA would charge to transmit Matanuska Electric power across GVEA's lines.   Apparently, Ft. Knox thinks they might get cheaper power than from GVEA directly.

The board did approve the Early Capital credit Retirement proposal you can see on the agenda.   First come, first serve is the policy, but the board (and myself, here) would like to see some outreach so it isn't just those in the know that take advantage of it.

GVEA is also getting prepped for the annual meeting April 30.  This year, there will be no freebies for registration to save $.  In many respects, the CEO is heading an effort to cut the fluff within the company. There will probably be fewer cookies at the meeting too.  OK with me.   There will still be must-be-present-to-win raffles.

This was the first meeting where a board member was actually 2 way audio and video from a remote location.   While not ideal, it makes it possible to attend meetings that have either been unsatisfyingly audio only or have a board member be a no-show.  Most board members don't miss meetings, a good thing of course.   Eventually, we might be able to get them live-streamed, but some on the board are currently not at all receptive.

The GVEA board changed their May meeting as the one calendared fell on Memorial Day that comes early this year.   So the May meeting will be May 19 instead.

1979 North Pole Refinery Energy Study

When GVEA was actively interested in being a part of the project to truck natural gas to Fairbanks the past couple of years, specifically to get a supply to their North Pole generation facilities, Flint Hills was also invited to the table.  Governor Parnell actually met with all the parties in 2013.   Flint Hills was asked about sharing some of their plans so that funding could be more forthcoming from the state.  Instead of cooperating, I was told that Flint Hills walked away and said they would not be involved in any way.  It would seem that their own secret business plans were more important than reducing the cost of energy from operating the refinery.  It kind of reminds me of their 'interested parties to buy the refinery', but only if Flint Hills could get off the hook for sulfolene cleanup, something they didn't adequately account for in their purchase agreement of the refinery from Williams Companies in 2004.  The refinery started operation in 1977 under Earth Resources, then was sold to Mapco in 1980, then was sold to Williams in 1998.

I thought I would share this 1979 North Pole Refinery Energy study that the FNSB produced.   It doesn't have any mention of environmental cost of pollution from spills, but had some other interesting numbers.   A chance to look at a bit of history.

GVEA doings in 2013

It's been a while since we've posted, however GVEA has been busy in 2013.  Here are some of the highlights from my attendance at meetings as a member-owner.  

Much of GVEA meetings are in executive session to which we member-owners are not privy.   This being said, the board meeting books on line are becoming more complete for members.  Anyone interested should browse the minutes and agendas.   It is rare when more than a member or two comes to the board meetings.     Slowly, GVEA high level activities are becoming more transparent to members, a good thing in my book.

Healy 2
GVEA purchased the Healy 2 (experimental) coal fired power plant from AIDEA and has committed gobs more money to restarting it.   GVEA Healy 2 webpage  This was approved at the Aug. 26, 2013 board meeting and glad to report the minutes are on line.

The board approved a $45 million loan and purchase of the plant from AIDEA and another loan for $87,800: $35 million for improvements, $50 million for emissions controls, and $2.8 million for an on-site warehouse.   The April 17, 2013 minutes actually reflect a diffent amount than on the GVEA page referenced above. With about $380 million having been spent on the plant prior to this, the total cost of this relatively small 50 mw plant is over $500 million.   The purchase and work to restart increases GVEA's debt substantially.   As of the end of 2012, GVEA debt was in excess of $380 mm.   This translates into an increase in our utility rate.  GVEA hopes that the eventual operation of this will reduce the energy charge, as coal is cheaper than oil.

Energy Sense Program
This program lost the long term employee in Feb. 2014 and GVEA wasn't very proactive in replacing him, having only one energy auditor who only worked one-two audits each evening.   GVEA contracted with the Cold Climate Housing Research Center (CCHRC) $30,000 to review and make recommendations.   The recommendations saw the light of day at the Jan. 27, 2014 board meeting.

Inclement Weather
Interior residents experienced long electrical outages with icing of lines due to rain then freezing in Nov. 2013 and Jan. 2014.    Trees fell over on the lines with high winds as well.   I hope GVEA will consider burying high risk distribution lines where the ground is stable (i.e. not on permafrost or high water table areas).   While it may cost more initially, the cost of the Nov. 2013 was perhaps $2 million. 

Good Cents Program
By rounding up your electric bill (unless you have oped out), GVEA collects about $30,000 per month to give away to non-profits and charitable organizations and occasionally needy individuals.  While their requirements for grants aren't conducive to other than professional organization (tax status, audits, etc.), this is quite a bit of money.   If the word really gets out, there could be lots of competition for funds.  At the moment, this is pretty much a voluntary effort to administer.

Wind
GVEA now has a year of data from the Eva Creek Wind Farm down by Healy.  It's performed just about as well as expected, providing the equivalent of 6,800 homes' worth of electricity for a year.   GVEA refused to buy additional wind from Mike Craft's Delta Wind farm because they indicated they couldn't figure out how to dispatch the additional electricity.    It's complex to dispatch the cheapest electricity and wind being variable, makes it more difficult.  Still, I hope this will become better understood and perhaps with addition of storage, we can use more wind.

Natural Gas Trucking
GVEA tried to work with Flint Hills on a joint project to truck liquified natural gas (LNG) from Prudhoe Bay.  The legislature provided some grant and low interest loan money for this project.   They met with the governor and Flint Hills, which stood to substantially reduce its energy operation cost, backed out of the project, unwilling to share any of its economics.    With the Koch Brothers since deciding to shut down the refinery, it kind of mocks their excuse that the reason was the sulfolene contamination (even though they committed to continuing the mitigation), but that's a subject for a separate blog.

The shutdown of the Flint Hills refinery also affects GVEA in no longer being able to get naptha from the refinery and also a loss of income from the pipeline subsidiary that GVEA owns to distribute oil from the Trans Alaska Pipeline to the refinery.   You'll no doubt be reading more about this.

As well, the Fairbanks Natural Gas (FNG) company and the Interior Alaska Natural Gas Utility (AGU) fought out service areas in greater Fairbanks and North Pole with the Regulatory Commision of Alaska, resulting in a split of territories.   The trucked natural gas and legislative help in providing loans for storage puts the onus on both companies to start building out distribution lines to residents and companies.  Thus far, FNG hadn't been building out to other than large consumers.   AGU is contracting with the same company that is hired to build the liquificaiton plant in Prudhoe Bay to start distribution network in the concentrated North Pole area.    GVEA will also be getting natural gas, converting North Pole oil fired plant(s) to use natural gas.

GVEA Rates
Energy rates have bounced up then down, helped by natural gas fired electricity across the Intertie from South Central Alaska (Chugach and for a short time, really cheap electricity from Homer Electric Association).  Utility rate will continue to go up as depreciation, loan payments of principal and interest increase from Eva Creek ($70+ million) and soon Healy 2.   Healy 2 is supposed to be operational within 2-3 years and reduce our need for high cost oil fired electricity about the same time as trucked natural gas will become available.    I do expect our rates to not decline much if any In the medium term, they could actually increase.    Cost of power rates adjust quarterly.  Utility rates can be adjusted every 6 months up to 4%.    When Healy 2 comes on line, there will be a need for a formal cost of power study (likely costing more than a million dollars).

Peak Notification Methods
As part of my 12 point transparency plan of several years ago presented to the Member Advisory Board (MAC) and the GVEA Board, I suggested that GVEA find simple way to notify consumers when demand was about to require high cost power be started.   Ideas such as texting, email, phone, all automated at low cost.   The board took the issue up and assigned it to the MAC.   They in turn had an ad-hoc MAC task force look at it whereby the VP who ran the meetings wrote up that it made no sense and gave it back to the CEO.   This of course made no sense and some members of the board weren't very happy.   I heard rumors of another report being generated and will be chasing that down.    The idea is very simple - if people would curtail incidental electric uses on occasion, we all could save.   This particular VP has since retired and the board may be looking at the MAC functions, which are supposed to be an asset of the board and not a tool of GVEA executives.   Making that clear to MAC members and getting them involved in a different manner may help.   It has to be a two way street.  I will report separately on progress on the 12 point plan hopefully soon.

Alasconnect
This was a subsidiary of GVEA and mixed employees.   At the end of 2012, it was separated out, though GVEA contracts with them for computer services.    It remains an asset of GVEA somehow, so it would be in the members' interest if it were anything other than nearly totally transparent to members.  I've been working on this for about a decade.  One improvement here is that the VP for computer-networking for GVEA and the president of Alasconnect, the same person, won't be getting a double salary.   You can see how that worked out for him at on page 10, line (15) of GVEA IRS Form 990 for 2012 (and previous years 2010 and 2011, available on line).

Tri-Valley Electric Association
Members may recall the 2006 effort of GVEA to transfer all its generation and transmission assets to Tri-Valley Electric Association, something that came out of a national electric coop association discussion.   GVEA members wisely turned it down.   It turns out that GVEA realized it wasn't needed after all as in July, 2013, the board voted to dissolve the corporation.

There were of course other issues that came up.  Again, do avail yourself of the minutes and agendas.  Become an active member of our co-op!